Data centers are at the heart of it. These facilities provide the computing power and energy capacity AI applications demand—and demand is soaring. Global data center demand is expected to grow 160% by 2030, potentially making the asset a priority for some commercial real estate investors.2
The AI boom is widely seen as a tailwind for data centers, but they’re a tough asset. Power constraints, operational complexity, and steep capital costs mean even surging demand doesn’t alleviate these investments of their significant risks.
Let’s break down the opportunities and hurdles facing one of CRE’s most closely watched asset classes in 2025.
What Are Data Centers—And How Do They Fit Into CRE?
When people talk about CRE’s core asset classes, they usually mean office, industrial, retail, and multifamily. Data centers have long been lumped in with industrial, but they’re increasingly viewed as a category of their own.
Data centers are physical facilities—large buildings or clusters of buildings—that house computing infrastructure and hardware.
Companies once stored data on local servers, but as cloud computing took off, many tech firms began consolidating their physical computing systems into centralized hubs. These hubs store, process, and distribute computing power and data across the digital economy.
For years, data centers were typically built in population and network hubs like Northern Virginia, chosen for their robust fiber-optic networks. As demand surges, many developers are now moving to less populated areas, where power is more available and costs are lower.
Investment Options for Data Centers
In CRE, data center investments generally fall into one of three categories, defined by the investor’s role in development and their desired exit strategy.
The first category is land investors, who buy tracts they believe will attract data center developers—often due to proximity to power and network infrastructure—and seek to sell them to buyers.
The second is partial developers, who buy land and build out basic shell infrastructure, such as large warehouse-style facilities, with the goal of selling to a developer or tech company to complete the build.
The third is full-scale developers. They buy land, handle the entire build-out—including engineering, supply chain, and technical systems—and seek to lease the finished data center to big tech firms and hyperscalers. This work typically requires a well-capitalized team, often partnering with an operator for specialized experience.
Each category has nuances that affect financing, development timelines, margins, and partnerships—but for simplicity, these three buckets help frame the investment landscape.
Demand Is Surging—But the Path Isn’t Easy
Demand for data centers has been generally steady since cloud computing took off—but the AI boom kicked it into overdrive. A single ChatGPT query uses 10 times the energy of a Google search, and that computing power runs through data centers.
Infographic from Goldman Sachs Research. Source: Masanet et al. (2020), Cisco, IEA, Goldman Sachs Research.
Experts project the global data center market will grow at a baseline 15 percent compound annual rate through 2027, with the potential to hit 20 percent. Much of that growth will be concentrated in the U.S., which accounts for roughly half of the world’s operating capacity today.
To date, demand has outstripped supply—a dynamic that’s expected to continue. That imbalance has created a bullish long-term outlook for the category, marked by low vacancy rates, rising rents, and asset appreciation.
But the reality is more complicated. Data centers are uniquely complex projects, requiring both enormous power access and specialized technical experience.
On the power side, buyers and tenants aren’t just securing space—they’re paying for electricity supply. Data centers need to plug into a grid capable of meeting their massive, uninterrupted power demands. That’s no small task.
On the operations side, building and running these facilities is equally demanding. Data centers have some of the toughest technical and security requirements of any CRE asset, driven by the complex needs of hyperscalers and other high-value tenants.
The level of investor involvement varies widely depending on the type of development (see above), but across the board, data centers are capital-intensive, operationally complex assets with a lot of moving parts.
Has DeepSeek Changed the Industry?
This article follows DeepSeek’s R1 model launch, which showcased impressive capabilities with significantly better energy efficiency than other leading large language models. Some analysts initially tempered their forecasts for data center demand in response.
A few weeks later, however, sentiment has shifted, and the industry's outlook remains generally strong. Experts argue that advancements in AI efficiency could ultimately attract more companies to the data center market, driving demand and, potentially, revenue growth.
The emerging consensus? At the very least, DeepSeek hasn’t meaningfully altered the industry’s trajectory—if anything, some experts see it as a reason to be even more bullish on data centers over the next decade.
Not All Data Centers Are Created Equal
As Blackstone puts it, the intersection of infrastructure and the need for power is one of the most exciting and critical investment themes of our time.
But surging demand can lead to a familiar risk: investors piling in, chasing momentum. In data centers—more than perhaps any other asset class—prudence is essential.
Digital Realty Trust, a real estate investment trust focusing on global cloud and carrier-neutral interconnected data centers, is up 24.14 percent in the last year. Data was collected on Feb 20, 2025.
There seems to be plenty of growth to capture, but it will likely favor developers and operators with the capital, technical experience, and operational discipline to handle these projects. Individual investors will need to be selective about the markets, partners, and deals they pursue.
CrowdStreet connects investors with opportunities in alternative assets, including data centers. For more on the market and insights on our deals and process, check out CrowdStreet's U.S. Commercial Real Estate Investing Outlook for 2025.
In addition to more general risks such as high vacancy rates, oversupply of product in the market, and credit quality of tenants, some of the factors that can impact the success or failure of industrial investments include declines in manufacturing activity due to reduced demand or trade agreements that outsource manufacturing efforts.
